01 Apr 2020
Household consumption in Australia has entered a new paradigm as people adjust to lockdown measures. Most people in Australia are either working or studying from home, caring for others, or social-distancing while unemployed.
Source: Total Shape
The most direct effect of lockdown is on categories related to socialising. Sport and exercise activities, live events, transport, tourism accommodation and dining out are the obvious categories within “social” consumption but fashion and beauty products are also in lower demand.
"Households are focusing on essentials as they face the uncertainties of illness, reduced income and economic hibernation. This has inevitably led to lower discretionary spending.”
Households are focusing on essentials as they face the uncertainties of illness, reduced income and economic hibernation. This has inevitably led to lower discretionary spending.
But, in the short term, spikes in demand for equipment to support working from home and for warding off boredom are showing up in ANZ-observed spending data1. Our latest data suggest that while spending is still elevated, particularly for electrical retailers (electronics, office equipment) and hardware/garden supplies, the peak of spending in these categories is likely to have come and gone.
Food retailers and utilities/communications providers are likely to see increased business. Staying at home means more household demand for groceries (to replace dining out), electricity, internet, online entertainment subscriptions and communication technology. Meanwhile, dining out revenue (which is now exclusively takeaway) has stabilised at around half of the spending that occurred in late March and early April last year.
Reduced income for many households is putting downward pressure on the biggest element of household consumption – rent and dwelling costs. ANZ Research expects negotiations between landlords and renters to reduce rents during lockdown.
To date, changes in household spending through ANZ-observed data have included strong growth in groceries, lower demand for clothing, jewellery and beauty services, and a shift away from entertainment and sporting clubs to recreation goods and sporting equipment.
ANZ Research expects to see household consumption patterns change long-term after COVID-19 pandemic has passed.
Across the ditch
According to Sharon Zollner, ANZ New Zealand Chief Economist, over the month of March in New Zealand some retailers benefited from consumer stockpiling while others lost out.
The picture in April, under Level 4 lockdown, is different again, with a lot more appearing on the left hand side, unfortunately.
Adelaide Timbrell is Economist and David Plank is Head of Australian Economics at ANZ Research
1. ANZ-observed spending is:
Proprietary data sourced from bank’s internal systems and includes, but is not limited to, card transaction data and merchant facility transaction data.
Desensitised, de-identified and aggregated.
Not scaled up to represent total household spending in Australia.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
01 Apr 2020
06 Apr 2020